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Storage startup Space Monkey just took the prize for best new startup at this week’s Launch conference in San Francisco. It’s no surprise, since this is one of the companies that everyone I’ve spoken to here has raved about.

The company is challenging cloud storage services like Dropbox — which seems to be doing pretty damn well, having raised money at a reported $4 billion valuation and also winning the best overall startup award at the most recent Crunchies. However, Space Monkey’s Clint Gordon-Carroll and Alen Peacock (their business cards say “Product Guy” and “Captain Science”, respectively) argue that the cloud approach has its flaws. With people storing more and more videos and images and other multimedia, it becomes increasingly expensive to keep that data in someone else’s cloud, and increasingly slow to push those files through your Internet connection.

Space Monkey, on the other hand, wants to combine the benefits of local storage and the cloud. Customers get a 1 terabyte hard drive, which means you can always access your files without dealing with your Internet connection. At the same time, the drive is connected to a peer-to-peer network, and copies of your files are also distributed in chunks to other devices. (They’re encrypted for security purposes.) The network allows you to access your files remotely, and also provides a backup in case your local storage fails — the company says more than half the network would have to go down before files are lost.

The company plans to start shipping devices this summer. It will charge a subscription fee of $10 a month (no extra charge to rent the hard drive). It’s also accepting pre-orders from 1,000 customers who want to pay for two years upfront — those early adopters get to keep the hard drive outright.

Even before launch, Space Monkey raised a $750,000 seed round of funding, which it didn’t announce until today. Investors include Polaris Ventures, Morado Ventures, Benjamin Ling, Venture51, and B-Squared. As one of the conference’s winners, Space Monkey is also being offered hundreds of thousands more in funding — I’ll update this post when I find out whether they’re taking it